The theory of diffusion of innovations by Rogers (2010) explains the diffusion process as a cumulative process where technological innovations are spread and adopted amongst
individuals and firms. As mentioned previously, the NFC mobile payment service is yet not at fully developed product available for the Norwegian market. Meaning that both the diffusion process and the adoption process will be analyzed based on theoretical models, related scientific research and empirical observation from interviewing industry experts.
Rogers (2010) states that for the diffusion process to take place it has to be an invention which is communicated through certain channels over time, amongst members of a social system. Coskun et al. (2012) writes that the NFC technology is a relative new technology that can be used for contactless communication. One of the first organizations who started to work with the technology for use in payment transactions was the NFC forum. Using the mobile phone as a wallet is new to most people, as it is not yet a common sight. Some markets have adopted mobile payments more than others, but the NFC technology is still considered being at a young state of development. However, recently more and more researchers have started to take a look at the NFC technology for mobile payments (Au & Kauffman, 2008; Benyo, Vilmos, Kovacs, & Kutor, 2007; Chen & Chang, 2011; Ondrus & Pigneur, 2009). In addition, media are now also becoming more interested in NFC mobile payment. A simple search online shows a growing number of article for NFC mobile payment. At the Barcelona World Mobile Congress there was a special focus at the NFC experience, where participant could try out the NFC technology in various settings (Mobile World Congress, 2013). During the interview with Hansen (OfficeLink), he explained how their merchant customers are becoming more aware of the technology. All of these examples indicate that the NFC technology is being communicated, which is considered a basic necessity for the diffusion process to take place, according to Rogers (2010).
The growing interest of NFC technology has also influenced both the payment industry and the mobile phone industry in particular. In addition, other key stakeholders in what can be considered the NFC ecosystem, is also paying closer attention. Hasleengen (Teller) explained
- 88 - how both Visa and MasterCard are currently working to implement contactless payment cards based on the NFC technology. Teller has already positioned themselves to be able to accept contactless payments by deploying NFC enabled payment terminals. Berbusmel (Telenor) and Skjelbred (DNB) both explained how they are positioning their companies through at joint venture, in order to create a NFC payment solution for their customers. As these industries move forward with the NFC technology and communicate this to their customers, it can be considered a step in the right direction in relation the diffusion process.
In the diffusion process the time perspective involved three elements; the innovation-decision process, innovativeness and the innovation rate of adoption. The innovation-decision process would involve the time it takes from a customer first experience NFC mobile payment, until an attitude to the product is formed. The innovativeness categorizes the individuals, in terms of being innovators, early adopters, early majority, late majority or laggards. Grüner-Hagen (NorgesGruppen), Skjelbred (DNB) and Hasleengen (Teller) mentioned that the first adopters of NFC mobile payment will probably be the younger generations and especially interested individuals. Experience from the banking industry shown the adoption of traditional payment card was slower for older generations than for younger. The last element, the innovation rate of adoption, reflects the amount of time for a certain percentage to adopt the innovation. Moore (2002) suggests “the chasm” as a turning point for both the innovation and the
adoption. According to Moore (2002) this would be the point at which the further path of the innovation can be defined. Whether it will be sustainable or fail to reach additional adoption. Skjelbred (DNB) mentioned that DNB work with an estimation of “the chasm” to be reached between Q3 – 2013 and Q2 – 2014. He also further underlined the importance of the
cooperation amongst stakeholders for a successful adoption of NFC mobile payment.
According to Skjelbred, one of the major focuses should be on defining a standardized set of rules for all participants, allowing the NFC ecosystem to evolve further. Berbusmel (Telenor) pointed out the importance of additional stakeholders to join in on the NFC ecosystem. She mentioned that Telenor are currently working with additional MNO‟s and financial
institutions in order to expand the NFC network. Other key stakeholder would benefit the entire NFC ecosystem in order for NFC mobile payment to be widely adopted
Companies like Telenor and DNB already have a large customer base, and can potentially provide the necessary basis for the deployment of the NFC mobile payment, with regard to Rogers (2010) “members of a social system”. Additional key stakeholder can potentially
- 89 - provide an even larger customer base. On the other hand, members of a social system would in this case also relate to the merchant, who are the other acting part of an adoption of NFC mobile payment. In that sense, both merchants and customer adoption should ideally occur at the same time. They are both dependent on each other for the NFC mobile payment service to work. For a successful market adoption of NFC mobile payment, all providers depend on the merchant and the customer to adopt. According to Hasleengen (Teller), they are already targeting merchants to install NFC enabled terminal. Many have already been installed and are ready to start accepting NFC payments with a simple upgrade of the merchant terminal software. Hansen (OfficeLink) confirms the deployment of NFC terminals at several merchant locations. In addition, he mentions that merchants‟ who own their own payment terminals might have a financial switching cost related to acquiring a NFC terminal. This potentially leads to a bottleneck in the distribution of NFC enabled terminals. Grüner-Hagen (NorgesGruppen) also confirms that all new terminal they install, already have NFC
capabilities. The oldest terminals are already replaced, and the remaining terminal will be replaced gradually. Grüner-Hagen further underlines that even if they have the terminals in place, they will not be opened for NFC transactions before NorgesGruppen knows the costs of NFC transaction. Currently, the cost of NFC transactions is much higher than ordinary
transaction cost, which means someone has to pay the additional cost. NorgesGruppen is potentially a huge stakeholder, representing the merchant interests in the NFC ecosystem.
Grüner-Hagen (NorgesGruppen) mentions a possible drawback for NFC mobile payment adoption. Currently, all mobile phones produced by Apple do not have embedded NFC technology. There are also great uncertainties about if they will ever implement the technology. Because Apple has such a large market share in Norway, a large group of
individuals automatically can be excluded from the NFC service, unless the change to mobile phones with NFC technology. Berbusmel (Telenor) pointed out that during Telenor‟s‟ pilot test of NFC payments, customers who tried it out had a very positive attitude towards the technology. However, if they were to use the service it has to function with their personal phones. Skjelbred (DNB) explained that they now see a trend where many new mobile phones come with NFC technology, except Apple and their mobile phones.
Norman (1998) states that all new technology takes time before they affect people lives. This can probably also count for NFC mobile payment. Most people are used to a wallet, and most are used to a mobile phone, but few people are used to the mobile phones as a wallet. One
- 90 - could argue that the combination of those two qualifies as disruptive technology, but that will eventually be determined by customers who adopt it. According to Moore (2002) “the chasm” can pose difficult challenges for a new innovation. In that sense larger companies or larger networks of companies are more likely to manage to cross “the chasm”, because of their resources and position in the market. Interviews with key industry stakeholders showed that there were different views on what role NFC mobile payment technology will have in the future. Hansen (OfficeLink) believed that the product primarily will serve as a supplement or a by-product to a traditional payment method, but with a growing market share in payment transactions over time. Hasleengen (Teller) believed that NFC transactions would dominate the market for low-value payments (amounts below 200NOK). Skjelbred (DNB) saw NFC mobile payment as a fully worthy contestant to traditional payments, for all transaction amounts, not only low value transactions. Over time, he visualized NFC mobile payment to replace traditional payment cards and cash.
How the various stakeholders in the NFC ecosystem visual the future of NFC payment might affect their effort and engagement in the cooperation, which again can affect the adoption of the NFC mobile payment service. A dilutive vision in the NFC ecosystem can cause
confusion amongst both adaptors and other stakeholders, eventually posing a challenge to influence adopters to adopt NFC mobile payment.
Conclusive summary of section
The diffusion process describes the phenomenon on how an innovation spreads amongst a group of individuals over time. The theory is relevant in relation to NFC mobile payment in order to understand how adoption might take its course. Moore (2002) explanation of “the chasm” is particularly important since it explains how a NFC mobile payment as a service might need to change as more users adopt the service. What type of change that might be is hard to predict at the current moment. For example, it can be related to the transaction amount limit, security features or widespread of infrastructure. Because NFC mobile payment
involves a complex ecosystem with many stakeholders, adoption is dependent on the joint effort of the cooperation amongst participants. Both consumers and merchants come in different forms. Some are “innovators” and some are “early adaptors”. These play an important role in the further evolvement of NFC mobile payment. Another key element of adoption is the infrastructure technology it requires. As Hasleengen (Teller) and Hansen (OfficeLink) mentioned, the deployment of NFC terminals to the market is already in
- 91 - progress. On the other hand, technology requirements for the adaptor might not be equally far on its way. As Grüner-Hagen (NorgesGruppen) and Skjelbred (DNB) noted, not all customer has a NFC enabled phone yet. There might be obstacles related to customer mobile phones, which eventually delay the adoption of NFC mobile payment in Norway.